On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate on Friday, June 29, 2018.
One of the most valuable clauses you can get in a commercial lease is a “go-dark” clause. However, many commercial tenants aren’t even familiar with the term.
If you’re trying to figure out a good way to protect yourself in case the iproperty turns out to be a money pit, this is what you should know.
What’s a go-dark clause?
Most commercial leases require you to operate your business continuously for the duration of the lease. If you’re in a unit with multiple stores, like a retail mall, that means adhering to the mall’s hours of operations — even if it isn’t profitable for you. It also puts you in default and can make you subject to penalties if you have to close down entirely.
A go-dark clause gives you the right to shut down your store without penalties as long as you pay your rent.
What else can they do?
In conjunction with a co-tenancy clause, you can also gain the right to close your store down or take a significant reduction in your rental obligation if one of the anchor stores in the mall goes out of business.
For anybody who has witnessed what can happen when the anchor store in a mall suddenly fails, this clause is an obvious life saver.
What other options are there?
You can also negotiate a “right to recapture” with the landlord. This will give the landlord the ability to take the space back if you decide you can’t keep up with the hours. This is often seen as a win-win for both parties. However, it can become a problem for tenants if they need to close for a short period. An overeager landlord can leap onto an opportunity like that to recapture the space when there’s another tenant waiting.
It’s important to consider the possibility that your store isn’t going to be profitable — even if it isn’t pleasant to consider. That’s the best way to manage your losses before they happen.
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